• Account for the usual VC/PE-investors’ investment rationale
• Account for the economic and financial features, attributes and qualities of a VC and/or PE fund portfolio company
• To analyze an VC and/or PE-investment transaction; including techniques to perform portfolio company valuation and (expected) investment return calculations
• To analyze the governance structure of a fund’s ownership of portfolio companies

Investments in privately held firms (i.e. in firms not listed on a public exchange) have received increased attention in recent years. One important subset hereof, venture capital (VC), is equity capital provided to early-stage, high-potential, high risk start-ups. Another is equity in firms taken over in leverage buy-outs, i.e., debt-based acquisitions of mature companies. The latter is often just referred to as private equity (PE), and this course will also use this term for such investments.
 
Venture capitalists are concerned with the financing of entrepreneurship – a popular focus of discussion among businesspeople, financiers, economists, and policymakers. At a macro level, economists and policymakers have increased their attention to the entrepreneurial enterprise because of its importance to economic growth and the significance of entrepreneurial businesses in job creation.
 
The capital market for financing such entrepreneurs – and private equity investing more generally – differs fundamentally from capital markets considered in standard corporate finance: First, start-ups are young, mostly unprofitable companies, with short operating histories and little capital. Young firms face exceptionally high degrees of uncertainty, constraining financing and creating difficult decisions about financial contracting. Second, capital markets for privately held companies are predominantly “deal markets” where terms and valuations are negotiated on a case-by-case basis, where investors can add value and are actively involved with the companies they finance.
 
It is no surprise, then, that a specialized capital market for financing the entrepreneurial business has emerged: the venture capital market. Developed from a boutique and niche-status in the US from 1960 to the 1980’s, the past 20 years the growth of the global venture capital industry has been remarkable. The reason, obviously, is that many of the most prominent and influential technology companies – e.g., Apple, Intel, Google, and Microsoft – originally were backed by venture capitalists.
 
But what do VCs really do? And how do they do it? How do they value a company? Do they add more than capital to the companies they invest in? If so, how? How do they raise their funds? This course will provide a comprehensive overview of the world of venture capital (VC). To a smaller extent we will also cover the world of private equity (PE), i.e., private investments in mature companies, since VC and PE taken together encompass the vast majority of active investment in privately held companies. The primary objective of the course is to provide an understanding of the concepts and institutions involved in entrepreneurial finance and private equity markets.

Various case studies and lecture notes.